Your tax documents - what to keep and shred

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(BPT) - Whether you use old-fashioned manila filing folders, a flash drive or cloud storage, tax and personal finance authorities agree on the importance of saving tax documents and records. In addition to using the information for preparing your next income tax return, it may come in handy years from now.

&ldquo;Your tax data is helpful and often required in many non-tax financial situations,&rdquo; says TaxACT spokesperson Jessi Dolmage. &ldquo;For instance, insurance companies, lenders and creditors often use tax information to verify income and asset value. Form W-2s can provide proof of income if your Social Security benefits are less than what they should be.&rdquo;

Information to save for your next tax return

Organizing and saving information throughout the year will cut tax return preparation time and can even save you money. Save any information related to:

While you don&rsquo;t need a fancy or high-tech organizing system, you do need to keep the information in a secure place. Consider saving electronic copies to the cloud or on a backup storage device in addition to, or in place of, your paper files.

&ldquo;One of the key advantages of going digital is that your tax information is better protected from natural disasters,&rdquo; says Dolmage. &ldquo;Saving electronically also means you can access the information anywhere from a mobile device.&rdquo;

Apps and websites make digitizing documents easy. TaxACT DocVault is a free mobile app and website specifically designed to create and save secure, digital copies of tax documents. At tax time, import DocVault images into TaxACT Deluxe to save with your return.

What to keep after filing your taxes and how long to keep it

Knowing what information to save and for how long can be confusing. As a general rule of thumb, keep tax returns and related documents for at least three years from the April 15 filing deadline.

* Three years: Tax return forms and schedules plus all information to support what you claimed on your return, especially records related to property, investments, or business assets (for depreciation). While there are exceptions, the IRS has three years to assess additional tax and audit returns. Three years is also the amount of time you have to amend your return.

* Four years: Many income-taxing states have an additional year to audit individual returns.

* Six years: Forms W-2, 1099, etc. because the IRS has six years to contact you if you&rsquo;ve failed to report income.

Certain documents should be saved longer. &ldquo;Information related to your home, property, investments and retirement plans should be kept indefinitely,&rdquo; says Dolmage. &ldquo;If you dispose of an asset, be sure to keep the information for another three years.&rdquo;

Business owners should keep tax information for at least four years. That includes employment records, gross receipts, invoices, bank statements, proofs of purchase, asset records, databases, emails and even voicemails.

Refer to IRS Publication 552 at www.irs.gov for more information about tax recordkeeping, Publications 583 and 463 provide specific information for businesses. Visit www.taxact.com/apps to download TaxACT DocVault for free.